On Thursday, April 1, I happened to walk out of my office in time to hear one of the Najarian brothers on CNBC. He was commenting on the fact that the jobs number was going to be released as usual that coming Friday morning even though the markets would be closed. Ahead of that release, most people were closing down positions, removing risk, he was saying.

I had spent the day thinking about how I was going to deal with the weekend price risk, too. What do you do if you have a position on the verge of needing an adjustment as the day or week closes or on the verge of reaching its projected profit? What are your choices? Are those choices impacted by a particular event risk or an economic release that will occur before the market next opens?

For example, imagine that you'd placed an OEX iron butterfly trade on March 18, with the OEX near 533. A trader might have been able to place that trade for about $1,085.00. Some traders set a profit target of about 20 percent for butterflies, although I'm keeping my butterfly targets at a more modest 15 percent. As of Thursday, April 1, the following strategy summary showed that the trade had a theoretical profit of 6.68 percent.

Strategy Summary for APR OEX 505/530/555 Butterfly:

This summary also shows that the position had a total delta of -44.31. This delta meant that the position would have theoretically suffered a $44.31 loss for each point the OEX might climb if the reaction to the jobs number was a rally. For a couple of weeks previous to this, I had been calculating one-day standard deviations for the OEX, and it typically came in within the 3.8-4.0 range. A 4-point rise, just a normal one-day, one-standard-deviation move if that move was to the upside, would wipe out $177.24 of that unrealized profit.

Actually, the loss would be a little higher. The gamma, the amount by which delta changes with each one-point change in the underlying, isn't displayed on this summary. It was theoretically -7.34. That negative number means that the delta gets more negative for each point that the OEX climbs. The damage would get worse as the OEX climbed. Of course, decreasing volatilities tend to help the butterfly, so would offset some of that price-related loss, and the passage of time would help, too, in this theta-positive trade.

However, be careful when calculating a weekend's theta decay on the last trading day of the week. Many former market makers warn that weekend decay begins to be priced in by midmorning on Friday afternoon, so that traders don't see as big a time-related benefit as they had hoped when looking at theoretical theta values. I first heard that advice years ago from a trading friend who had heard it on a think-or-swim webinar, but it is advice I've since heard repeated from other former or current market makers.

Taking in all this information about this theoretical position, there was a real risk that much of the accumulated profit might be lost, especially if the reaction to the jobs number was a blow-off rally. Should the wise trader have closed down the trade and locked in the profit?

Of course, we know now what happened after the jobs number was released that Friday and markets opened the next Monday. Of course, it was the wise thing to do, you could surmise now. But that reaction to the jobs number wasn't guaranteed. Similarly, there was no guarantee on April 1 that such a tactic was the wise thing to do.

Even with good numbers, there's always the chance of a sell-the-news reaction to the downside. Such a reaction would have added profit to the trade. In addition, over the long-run, employing a practice of always cutting winning trades too short can undermine a trading account. The accumulated profits might not be big enough to balance out the inevitable losses. Traders must acknowledge all the risks before making such a decision.

I know what I would have done, but I do have a tendency to cut winning trades too short and my decision would have played right into that tendency. Especially if I'd had several contracts of this butterfly, I would have taken off at least some of those contracts and locked in at least partial profit. Najarian mentioned that many were closing down positions are removing risk, and certainly that included some with profitable positions, removing the risk that profit turned to loss. Traders should keep in mind when making such decisions that it's possible to reposition the trade come Monday morning if the risk has been reduced.

What about in cases in which there isn't profit to be protected but rather losses to be guarded against? I faced such a decision that Thursday afternoon. A credit spread wasn't yet profitable. My choices included taking off all or a portion of the spreads and then repositioning them Monday or Tuesday, doing nothing, or hedging the price risk in some manner. There was no crystal ball telling me the one correct choice. Even if someone had given me an early peek at the jobs number, I couldn't have predicted whether we'd get a rally or the completion of a "buy the rumor, sell the fact" reaction that was underway.

Doing nothing was not a viable choice for me. The position was a negative delta one and would have been hurt by a too-big rise in prices. Thursday, when the SPX soared more than 10 points in the first five minutes of trading, it was easy to imagine what might happen to my trade if the reaction was a blissful one. The next decision was how much price-related or delta risk did I want to remove? I decided I wanted to remove at least two-thirds of the risk I had related to price movement. That meant either closing down about two-thirds of my spreads, hoping to reposition them at the same or a different level early the next week, or buying back-month longs to hedge two-thirds of the price-related risk.

Each choice had its risks. Closing down the spreads and removing that risk over the weekend was appealing. However, I was aware that the theta-related decay was speeding up for my soon-to-expire options. Selling the spread again early the next week might mean I'd have to place it closer to the then-current price to obtain the same credit. That wasn't appealing. Would I know the right time to sell it, the time when the markets were about to steady for a while or turn down again? Anyone who has thought they were certain about the timing of that slowdown or rollover has been proven wrong lately.

Buying back-month longs had its risks, too. Those longs are expensive, and their value would suffer if prices gapped lower Monday morning. They'd suffer some time-related decay over the weekend. However, they'd suffer far less time decay than the front-month spreads would have done. It's also easier to quickly close out single contracts than it is to sell back a vertical, a credit spread. I elected to delta hedge with back-month longs. I did so knowing that I had no guarantee that my decision was the right one.

We just have to make the best decisions we know how to make. We're not going to have guarantees. Sometimes lifting off the whole position and replacing it after the announcement is the best decision. This is often the one I took when I was day trading with calls or puts, for example. It's also likely the one I would take if I had a profit that was reasonable. Whether it's best to remove risk in a trade that isn't yet profitable and how to lessen that risk might be a more complicated decision.

However, make it a part of your trading strategy to consider some actions as big announcements loom, especially with options positions that don't have much time until expiration.